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When charting un navigated waters, there is not yardstick, and oz house prices are at record levels. We dont have enough data to come to any firm conclusion here in oz because we only have small amounts of historic data relative to other countries with centuries of house price data. Interest rates can trend in one direction for between 30-60yrs, how much accurate/comprehensive data do we have to substantiate any claims about the robustness or longevity of any housing bull market here in oz?
The long cycle can last anywhere between 10-25yrs, then as market conditions change, so must asset allocation, unfortunately for most fund managers, they find it difficult to change styles, and wish to stick to the asset class that has made them wealthy, unfortunately markets do not work this way, as every market eventually goes into market decay when measured in REAL TERMS, and thats one of the big differences between the investment winners and losers, is how to measure real gains across different asset classes and different currencies, etc etc. Wealth building takes time unless you are extrodinarily gifted or lucky, but that kind of luck runs out quick, as you will be fleeced by the smart money at the first opportunity. Suckers are being lined up as we chat….
In the long cycle the less decisions you make the better if one is grounded in correct market sector. Of course holding onto a bad position is financial death, and this is where extensive knowledge is key, it takes at least 5-10yrs of serious study to really understand it, and as much practical market participation as you can handle. Although these forums can be useful to beginners, seasoned investors know its about understanding trends and superlative research.
Like i said, the aussie property market may be different, and may not experience distribution of strong to weak hands, but i would not bet on it with a large property portfolio, thats just my personal view.
Perhaps the distribution will occur with frequent shallow sell offs of less than 10% endlessly, but this is all speculation, history is littered with examples of bulletproof investments that have turned sour as a result of some unexpected event.
Thats why i said earlier that markets are not rational, its all sentiment, and the sentiment here in oz is buy at any price one can afford.
Right now property market is highly liquid and very well priced in oz by any valuation measure there is.
People have to make their best judgement call as to the ongoing gain of investment properties going forward.A large amount of this dicussion is academic however, if someone has 100 investment properties with no debt, i doubt they will lose any sleep over a correction in property prices, i speak purely from the point of view of asset classes most likely to increase substantially relative to property.
Maybe I'm getting this wrong, but are we then suggesting that precious metals were a good buy 10 years ago and they too, are now overvalued?
I am not saying they are overvalued, valuation of precious metals would take many pages to explain and any simplistic explanation would be misleading, in a nutshell precious metals are rising because fiat currencies are being inflated and precious metals become more valuable as circulating currencies increase during the backdrop of a commodity cycle upswing. Investing in any commodity succesfully takes years of research and experience.
Maybe I'm young and foolish, which is why I have no idea what an undervalued market really looks like. Certainly, younger folks did not have the luxury of experiencing market rises and falls like some of those in our company have.
My advice to you is this, study the history of financial markets in as much depth as you can tolerate, specifically in terms of what is an approapriate percentage movement for any particular asset class, if an asset has moved up over a certain percentage, then it becomes riskier to enter, and the smart money has entered long before and is in the process of distributing into weaker hands. An example of this would be the oil market, over the last 11yrs there has been a 1000% advance in the price of crude, with the smart money buying in at 11-15 per barrel. Since then smart money has also re entered at the GFC low.
The smart money leave clues they cannot eliminate, which is indicated primarily in volume and accumulation patterns. Look to volume flows as a guide, sometimes these volume flows are simple to decipher, at other times more difficult.
A good example at the moment is the USD. Over the last year there have been record volumes flowing in and out of the USD that have not been seen in over 3 decades. Smart money is definitely active, but in this example it is difficult to decipher to outcome because the dollar is at such a pivotal point in terms of its long term value.
Another example is the fact that there is one person/institution that controls over 85% of the copper
in the london metal exchange, look a the volumes in copper, they tell a story. This kind of activity is normally illegal, but is being permitted presently.
IMO we are heading for a resource war and smart money is positioning itself. Other controlling interests are being held in Tin, and Nickel.I am not suggesting anyone buy these commodites, all i am saying is that once we look at relative asset prices, one can find where smart money is positioning itself,
But I digress…
One if the most important markets to watch for housing investment is the bond market, but it rarely gets any mention,(bond markets historically do badly when there is inflation) anyone invested in property that is serious should understand global market risk, and right now it is at record levels, hence ongoing appeal of precious metals and other defensive assets.
Good luck
SMSF rule changes have increased participation in the housing market, allowing another massive pool of funds to enter the
property market and prop up values, the bigger the bull, the bigger the bear, unless we re write the record books and have the first property market in history to never correct.
Yes precious metals is an area that has done well, and the smart money entered 10yrs ago, holding until these metals are over valued (appropriate valuation of precious metals being on of the most misunderstood aspects of financial analysis).
My point is that smart money would not be buying large amounts of property relative to the rest of their portfolio at record high prices, when there are other undervalued assets that are being neglected by the public and institutional investors.A bull market that has not significantly corrected since 1955 is certainly very mature, and betting on a rise in real value in the coming years just like the last would be foolish IMO, and also indicative of a very unhealthy market, as all healthy and free markets swing from being overvalued to undervalued, unless govt develops policy that undermines the health of a market, which has occurred here in the Australian residential property market. That being said there is a brutal inflationary problem developing globally, and those that measure asset prices incorrectly without accounting for the eroding purchasing power of the dollar or crucial money supply increases are not accurately assessing the market.
Financial market precidents are being smashed almost every month to the informed investor, not having respect for the magnitude of changes will be costly to many, remember a bull market makes everyone look good.
And fword, if you can`t figure out what an undervalued market looks like, then you will likely struggle making the right choice when it comes to re balancing your portfolio. You need to work to find solutions, in light of an accurate assessment of the issues at hand. The question i have for you is why don't you know the answer to what investments would do well in inflationary environments?
Simple enough?
Smart money is and has been flowing into assets that will do well during inflation.
Financial markets are not rational, this is what forms manic/bust cycles. No market is immune to these forces. Anyone overweight property in their portfolios should be very careful, as we are in the mania phase in aussie property IMO. The signs are obvious to anyone who is objective. Maximum public participation, easy money lending, low interest rates, low unemployment rates, properties being bid up for fear that they will rise even further in the near future, and the broad view that property is a bulletproof investment here in Australia. There are no sure things in financial markets.
